Lower money market rates are a factor in the rising stock market
Posted By RichC on July 24, 2025
Are too many people still sitting on cash as yields decline?
Interest rates are likely to decline further and the question is, “should people lock into rates now (ie. Bonds, CDs or short term treasuries) or shift more heavily to equities?”
One of the contributing factors powering the strong stock market is likely the falling rates money markets, cds, savings, etc. compared to the last few years. As inflation eased, money market rates dropped after the 2024 election and inflation eased. Yields are now at the point investors sitting with cash need to search for better yields. Often it is in equities/stocks – and likely dividend paying stocks for more conservative value investors who prefer holding bonds and interest paying assets.
The story also has to do with anticipation that the Federal Reserve will eventually cut borrowing rates (under heavy pressure from the White House to lower rates) … 
and therefore yields on money markets will head even lower as the year draws to a close. This will likely tip the scales further in favor of equities or higher yielding bonds as more money exits money market funds.
The quandary for those near or in retirement: What to do if the scale becomes too unbalanced towards equities (as it always does)?
Food for thought, especially if you’re the nervous Nellie type (or a “worry wart” in memory of MomC). Note: I wanted to keep my Idioms category active! 😉
Comments